Much of the fury in Jersey as a result of the comments made by Deputy Montfort Tadier has focussed on the issue of sham trusts.
Senator Philip Ozouf says there are no sham trust in Jersey. He is simply, and straightforwardly, wrong. I made clear in 2006, right at the start of the history of this blog, that what would in English law be considered sham trusts were made legal in Jersey in that year. At the time I said it was vital to understand just what a trust is:
Trusts are an instrument normally only available in Anglo Saxon common law. Wikipedia describes a trust as:
“a relationship in which a person or entity (the trustee) holds legal title to certain property (the trust property) but is bound by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organizations (the beneficiary), who hold “beneficial” or “equitable” title”
I summarised that like this:
To put it another way, one person says to a second “please look after this asset for me, but when doing so make sure (for example) that the income goes to this third person during their life and when they die the remaining property goes to another, fourth person”. All trusts are meant to incorporate this split of roles, responsibilities and entitlements. If they did not then there would be no need for a trust. The property would be owned absolutely by one person for their own benefit.
It's really important that this be understood. A person has to give property away for a trust to exist. If they don't give it away then there's a mere nominee arrangement or blind trust. They have their role (e.g. when politicians are in office and do not want, and are not able, to manage their investments without conflicts of interest) but they have no tax effect, so are not the issue we're looking at in Jersey. I stress, if an asset is not given away there is no trust.
And the trustee must be wholly independent of the person (called the settlor) who gives the asset away. If not then the asset has, again, not been given away so there is no trust as there is no trustee.
And last, whoever benefits from the assets it cannot be the settlor, or again they haven't given them away and there is no trust.
In any case where the assets aren't given away by the settlor, or where the trustees don't really manage the assets and the settlor does, or where the settlor can benefit from the trust there's either a nominee arrangement or, if it's represented that there is a rust, then there's a sham. Now a sham is, at it's kindest, a charade. To put it another way, it can easily be a fraud and that will always be the case if something is represented to be a trust when in practice it is no such thing but the advantages of a trust are secured none the less.
That's a long introduction, but it's vital, because in 2006 Jersey made legal trusts with reserved powers. As local law firm Appleby says:
A reserved powers trust allows a third party to the trust (usually but not necessarily the settlor or other instigator of the trust) to retain certain powers in respect of the trust. These powers may deal with any aspect of the trust, ranging from how the trusts' assets are invested through to who may benefit from the trust and in what circumstances. Trusts of this type offer a flexibility which appeals to many prospective settlors, although in each case care will need to be taken to ensure that the reservation of any particular power or powers does not give rise to any adverse tax consequences.
Another local trust company says of the powers that may be reserved that they include:
- To add, remove or exclude beneficiaries
- To appoint or remove a trustee, enforcer or protector
- To revoke, vary or amend the terms of the trust deed
- To advance, appoint, pay or apply income or capital of the trust property or to give directions for the making of them
- To give investment directions — binding directions to the trustee in connection with the purchase, retention, sale, management, lending, pledging or charging of the trust property or the exercise of any powers or rights arising from such property
- To appoint or remove a director of any company wholly or partly owned by the trust
- To appoint or remove an investment manager or investment adviser
- To change the proper law of the trust
- To restrict the exercise of any powers or discretions of a trustee by requiring that they shall only be exercisable with the consent of the settlor or any other person as may be specified in the terms of the trust
To put it another way, there is nothing the settlor cannot do. They can do anything from revoke the trust (that is claim all the assets back, meaning that the trust is cancelled), which is not an often advertised feature but which is clearly allowed (see here), to sacking all trustees, naming themselves as the beneficiary, move the trust to another jurisdiction and make all trustee decisions.
Now as this second trust firm says, in their defence:
Reserved powers trusts are popular with settlors for whom the primary objectives of the trust are neither mitigating tax nor asset protection.
And they add:
Onshore legal and tax rules may limit the nature and extent of the powers that can be reserved by a settlor before they compromise or negate the advantages of a reserved powers trust. As such it is essential that onshore tax, legal and risk mitigation advice is taken by the settlor prior to the establishment of the trust.
But the point is, that as this wording makes clear, Jersey permits what it calls a trust something that is blatantly not a trust in the law of countries like the UK - or France, come to that. Such trusts are shams, and in my opinion when the trustees know that they can be replaced at any time, can have their discretion over-ruled and can have the beneficiaries changes at a moment's notice, or simply see the trust be moved to another jurisdiction, then whatever they wish to say of their role it seems to be that of a pure nominee, whatever is claimed. Indeed, when Trident Trust say the attractions of the arrangement are that:
The advantages of a settlor reserved powers trust include:
- The settlor is able to retain a level of control that allows him or her to provide direction in investment and administration decisions
- The settlor is able to eliminate his or her concerns over transferring full control to institutional trustees
I think it must be concluded that it is known that such arrangements disenfranchise the trustee.
Now, if this were never to be used to abuse tax that would be fine. And I am sure that happens so I am casting no aspersions against anyone for creating such a trust or managing it.
But with the best will in the world, such an arrangement could easily be abused. That's especially likely when there is no trust register of any sort in Jersey, and so the existence of any trust, its management arrangements and what it actually does has to be disclosed to no one on the island. The possibility that in that case even a local trustee could be abused by their client and the trust that they notionally manage on behalf of their client who has reserved powers for themselves might facilitate fraud must exist.
This abuse is what I drew attention to in 2006. And when I did so a strange thing happened. Out of the blue an email exchange between Jersey politicians and civil servants arrived at the Observer newspaper, and was then shared with me. The whole exchange is here. What was very apparent from this exchange was that Jersey knew that their trusts were being abused at that time (and that's not so long ago). It was said that:
I imagine that a large number of wealthy people all over the world (including Jersey) do just the thing you fear in your e-mail - place assets in trusts in another jurisdiction, define themselves as excluded persons for the time they are resident in a specific jurisdiction, have assets returned to them when they cease to be resident in that jurisdiction, and then receive all the gains/rolled-up income tax free.
So Jersey knew it was being used for sham trusts in 2006. And rather than stop it, as I noted at the time it was said in the email exchange that:
The changes to the Trusts Law are intended to give statutory certainty to a practice that is already widely carried out. Currently, it is common for assets such as shares in a family company to be placed in trust, but for the settlor to wish to retain control over how the company is operated. Or an investment portfolio may be placed in trust, but the settlor may wish to manage the investments.
In other words, rather than seeking to stop the tax evasion that was going on, Jersey was seeking to endorse it.
No wonder Malcolm Campbell (then Comptroller of income tax in Jersey) said to the Observer that there was nothing in the proposed changes that would ‘make tax avoidance or evasion more likely than under the present statute.' I'm sure that was true. What Jersey was seeking to do was to pass statute that endorsed the evasion that it knew was already taking place. Indeed, as one participant in the emails said:
‘What [these new laws] will do is allow Jersey to compete more effectively for international work'.
As another said
'As Jersey is squarely pitching itself at the expert/sophisticated/ultra-high net worth end of the market, we need settlor reserved powers in order to offer an attractive product to international clients.'
To put it another way (as the quote in the Observer makes clear) Jersey knew its clients would, and had been, evading anyway so it passed law to allow that to happen, legally, within Jersey.
And Jersey did not stop there as when it came to create a law permitting foundations it repeated the trick, in 2009. As I have noted on this blog, an article in the Jersey & Guernsey Law Review from 2010 by Filippo Noseda discussed The Foundations (Jersey) Law 2009 under the title ‘A Civilian Perspective: Not so plain vanilla and possibly a tad wacky' and concluded:
From a civilian perspective, the policy statement that a [Jersey] foundation may accord more control to the creator of the structure than a trust appears quite bewildering, given the amount of powers that a settlor of an ordinary Jersey trust may retain for himself under art 9A of the Trusts (Jersey) Law 1984 (2007 revision) without turning it into a sham or nomineeship.
and:
Even without any prior knowledge of foundation law principles, it is difficult to imagine a wealth management structure under which the founder may retain more powers than those described under art 9A TJL without exposing such a structure to an attack based on sham.
In other words, even in the local learned legal press it has been suggested that the arrangements I have described can be considered either a sham or nominee arrangements - and foundation law is even more open to abuse. It's not just me saying so.
So, to come back to the debate between Monfort Tadier and Philip Ozouf, Ozouf has said this on his blog about sham trusts:
Sham trusts are illegal and would be struck down by the courts. He fails to say that Jersey, unlike most European countries regulates all Trust companies in Jersey. The regulator would expect licensed providers not to administer sham trusts
He makes much of this point - indeed, it seems to become almost the heart of the issue in this television interview between the two. Well, with respect Philip, what's a sham in Jersey is not a sham elsewhere. And that's the whole point of this, and why Tadier is right and Ozouf is completely wrong.
What Ozouf is playing is sophistry. Of course there are no sham trusts in Jersey: that's because Jersey knowingly legalised the sham in 2006, as the correspondence disclosed then revealed. But that does not mean that these trusts are not shams according to the laws of other jurisdictions as, in fairness, the local lawyers and trust companies point out. They are shams in the UK, and elsewhere. Even the local legal journal recognises that. But Ozouf, playing strictly by the rules of the Jersey goldfish bowl where, candidly, if it suited the local finance industry a law would be passed saying black is white and Ozouf would argue forever that this was then the case, denies this because he refuses, absolutely, to recognise what Tadier is saying, which is that when viewed from another jurisdiction there really is a sham.
And it is Ozouf who shows he does not know the reality of Jersey's finance industry in the process, although he repeatedly accuses Tadier of not doing so. Tadier is recognising that Jersey is "offshore". That means it exists to service clients from other places: the term has nothing to do with being an island. In that case it is the law of those other places and whether or not they think a Jersey trust is a sham or not that matters. Ozouf denies this and sticks rigidly to Jersey law, which as the 2006 correspondence shows, was passed to legitimise something that was very obviously illegitimate elsewhere and in the process let it continue in Jersey which could then claim it was well regulated, none the less.
Ozouf's claim on this issue is at best disingenuous. Tadier's is completely honest, and correct. Jersey allows sham trusts. It does so knowingly. Tadier was right to say so, because it is true. It is something it should stop doing. Ozouf should agree. Instead he condemned Tadier. It says a lot about Ozouf that he did so.
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The question of whether Jersey is deemed a Tax Haven, or not, is not the entire reason on why the Treasury Minister Philip Ozouf was so insensed in his debate with Deputy Tadier.
You have to remember that just because certain jurisdictions have loopholes in their tax affairs, and that independent financial house’s based and licensed within the the Jersey’s Financial sector take advantage of them, doesn’t necessarily mean Jersey condone’s it completley.
However, there is an argument that one could look at Jersey as ” aiding & abetting” on this form of aggresive tax avoidance by allowing these type of financial products being offered within its jurisdiction.
One has to remember that Jersey’s government are well aware of these issues in today’s worldwide awareness of Tax avoidance and are taking steps to tackle the issue head on.
I think that the majority of people would accept that Mr Tadier’s claims may have foundation in some respects, however, whilst jersey is acknowledging the fact that their economy needs to be drastically diversified it can be taken as a form of acceptance by jersey’s politicians that the future of long term offshore finance centres are inevitbly doomed.
The question of whether Mr Tadier was right in internationally stating that Jersey is at fault for costing the french treasury millions is being looked upon by many people in Jersey as not being responsible with regards to his motivations , one has to remember that Mr Tadier has a responsibilty to be part of the solution and as being part of local government not someone who greases the rope that Jersey is using whilst trying to climb out of the cave that resides to all offshore finance jurisdictions around the world.
But then again, Is Mr Tadier correct in saying that the financial Industry is effecting many of his constituants , by either new taxes , the chance to buy their own homes , and on that point his motivation could be to seen to highlight the point of what an economy based on financial services can do to effect the lifestyle of many islanders.
The Judge is out on that.
Jersey Justice
I think Montfort is rightly saying Jersey has to plan for a different future
The ostrich Ozouf denies that
Which shows the fool he is
Well, why don’t you reinvent Sealink, a guaranteed source of Labour tourism, cheap beer and fags, and slap and tickle?
You may not have noticed but that multitude of good people no longer wants to come. The older hotels are mostly struggling to keep their exteriors painted.
Each time a new method of making money and creating wealth appears, it is roundly pounced upon by Left wing UK experts as being a threat to that particular nation of shopkeepers. Cite France, you get Napoleon. Curious that the TUC and the “nouveau chocolateers” should be sponsoring the cause of the high street.
The answer is that the world has changed since your childhood visits to the Island, and that the law here prevents Jerseymen and women from knitting beyond a certain amount of Jersey Jumpers per annum to keep warm! The only Plan B is independence, but then you would have precious little to complain and rant about.
Where are the resources and the business plan to support your Plan B? The answer is in your mind. If you looked at a Map, the assertion that Jersey is part of the British Isles becomes a little specious: the Island’s air traffic control is subject to a French anomaly known as French airspace, and we have to go about 50 miles to the north to get out of la Baie de Mont Saint Michel into la Manche, or as the British still insist on calling it the English Channel. Find a Navy to patrol it, the Island pays its defence contributions to the UK budget, a little like it were forced to pay the Germans a levy for their defence against the Allies during the occupation and the uncivil engineering. Otherwise, rather than having market rate produce imported, we are stuck in a mindlessly uncompetitive English distribution cartel and paying inflated English prices. Go to a French supermarket and pay for your ferry ticket on the saving. Do the maths.
Oh dear, poor little Jersey is it now?
A population of around 100,000 is less than the size of Exeter. Little perhaps, but all things are relative…..
You are just making out that reserved Settlor powers constitutes a Sham Trust when they are only there as a safeguard. There is no argument here, the Trust Law in Jersey may not be to your liking but that’s your problem.
If the power exists it is a sham
No if, no but. It’s a sham
Not in Jersey it isn’t. Like I said, just because you do not approve Jersey Trust Law is irrelevant to Jersey.
But as I said – it’s only not in jersey because you made illegality legal
And then you claim you’re a reputable financial centre
The fact remains that reserved Settlor Powers are perfectly legal under Jersey Law and at one time they would have been approved and passed by the States Assembly. You can fob it off as a sham for eternity but in Jersey is isn’t. But surely if Deputy Montfort Tadier has an issue with this it is up to him to table amendments to the law? It seems a bit strange that a States Member would go straight to the media with a gripe before discussing it at a professional level with his co-workers?
You ignore the fact you knowingly created trusts that are shams elsewhere for use elsewhere, which assists evasion
That reveals the truth at the heart of Jersey
There is no law in England that prevents a reserved power under an English law tryst, not only are they allowed, they and their exercise are upheld by the English courts. Inxcidentally so are secret truysts when the secret trustee admits and acrts uopin them. I am surprised that you consider that Jersey invented them.
Is the entire property legislation in England and Wales a sham, simply because an Irish accountant working for the TUC and the Rowntree trust has not taken a law degree?
These trusts would be shams in the UK – not trusts at all
And all the material I link to makes that clear
Richard
Rubbish. They would be valid trusts in England & Wales. The courts would uphold them as valid trusts.
Tax law may well disregard them for tax purposes only, but that does not make them invalid or sham trusts. It just means they are ineffective for tax purposes. Being tax-ineffective does not make them invalid or sham trusts.
But as they could easily be used for tax purposes without anyone knowing – as Jersey officials recognised in their correspondence – that is just not true
So they are shams
Rochard, you have been granted a chair on the GAAR Panel of Experr(ts, and you evidently haveno idea of what a trust is. Do you seriously consider that this rant will lead to you being treated as a sensible memberof teh opanel?
As an aside, the French Civil Code simply does not permit a trust dismemberment, as it has a unitary concept fo property law. It does howeer recognise the capacity of a French individual, on a private international law basis to exercise his fundamùental freedom to aarrange his foreign property and assets in the manner in which he chooses, subject to certain exceptions.
Are you now saying that a French individual in London is to be called a “shammer” because he owns a property jointly with his wife. There is a statutory trust inmposd by the LPA 1925. Think before you type, you are blunting your sword and fixing the balances!.
You are well aware that I am referring to a very particular arrangement created for tax abuse
Putting up a straw man response does you no favours
And suggests you cannot deal with the reality of my accusation
Ozouf is a puppet put there by the City of London. The Big 4 will of course be throwing their weight behind Ozouf.
Incidentally, Mike Truman has written an article in Taxation called “Adopt an MP” An invitation to improve Parliament’s understanding of tax, in light of the latest report on avoidance. Hmm, this is likely to be one sided education in support of the wealth and job creators. Perhaps this is education should more correctly be described as “re education”.
Now where have I heard “re-education” before?
Surely Mike isn’t becoming a “Tax Maoist”:-)
This is the same Mike Truman who called Margaret Hodge “Tax Prat of the Year”
I think those who will accept the invitation might be a little one sided
And what is more – she got the issue right – and he got it wrong, as Tom Bergin now seems to be proving
Thanks for doing this post, it was very helpful.
The thing that has annoyed me so much is seeing people (and Ozouf was the main culprit) accusing Tadier of being “anti-Jersey” or that he is “denouncing Jersey” as if finance and Jersey are synonymous.
A Jerseyman who is serving the island he loves as an elected politician is accused of being guilty of treason because he has moral problems with a part of one of Jersey’s industries. It’s so illogical but seems to be believed by people here.
Surely those that criticise their country and argue for it to improve are the most patriotic of them all?
Could you explain to me what purpose a trust in Jersey may serve, in which in the Declaration of Trust, you will cease to be a beneficiary of a trust if you become a resident in Jersey? So, all the assets/ property and all the people connected to the trust are based in England, except the trustee which is in Jersey. Why not just have the trust in England, under English law. Is there a legitimate reason for using Jersey instead that doesn’t involved avoiding tax?
Thanks.
The only reason is secrecy
So what are you hiding, who from and why?
Few do it for fun. There’s always a reason for paying the price, and it is rarely honourable
Tadier is sticking up for the 88,000 jersey residents that do not work in finance. What he said is true, I know it, Ozouf knows it and so do many others in the industry here and abroad. We have had so many scandals erupt just in the last 24 months that anybody who says that all money in Jersey is clean and not avoiding tax in the home country is either, deluded, thick or not telling the truth.
Tadier said he has whistleblowers, remember HSBC Ozouf?
I can see one person winning this argument and it ain’t Ozouf.
Le Parisien newspaper only came to Jersey because the editor suddenly got interested in tax avoidance following the Cahuzac affair. The former French Budget Minister lied about having a Swiss account and is charged with fraud.
Le Parisien has a circulation of about 400,000 and is one of France’s best selling newspapers. It is similar to Britain’s Daily Mail. It is significant that the section of the populace that read the paper is interested in the subject. It shows that concern about tax avoidance is now mainstream. I am sure that the readership would have no difficulty in understanding that Jersey is a paradis fiscal — that is to say a tax haven, with all the pejorative implications.
The reaction of Treasury Minister Senator Philip Ozouf to the publication of the article and his attempt to discipline a Deputy from the island’s parliament for having the audacity to appear critical of his beloved finance industry, is very revealing. As the crisis deepens and the future looks very dark, the government of the island, conscious of its inability to offer solutions, acts in an ever more hysterical fashion.
Agreed
Richard
A trust with reserved powers is not a “sham”. The assets which are settled are settled subject to the powers of the trust. It makes no difference if the settlor has the power to determine whether the main trust asset, ie the shares of a company, are sold, because either the shares (if they are not sold) or the sale proceeds (if they are sold) remain subject to the provisions of the trust. There is nothing “sham” about that. A real trust, as defined by trust law precedent going back centuries, very clearly exists. The assets do not still belong to the settlor because economically he is no more able to benefit from the trust fund than if he didn’t hold the reserve power. The trust corpus still exists, and the trustees have a fiduciary duty to hold that trust fund for the benefit of the beneficiaries.
There is absolutely no doubt though that in many countries, the reservation of certain powers by the settlor usually negates any tax planning advantages. That is irrelevant though for Jersey’s main target markets since these laws were introduced. There are no personal taxes in the Middle East and there are no personal taxes on foreign-located assets in most countries of the Far East, so its not a tax issue for them,and therefore there is no tax abuse.
Trusts are interpreted differently in many parts of the world. In the US, states like Delaware, South Dakota and Alaska have very different trust laws to those seen in English legal systems. They usually have an administrative trustee, a custodian trustee and an investment trustee, and the settlor/grantor often is appointed as the investment trustee, thereby reserving certain powers.
For what it s worth, in my view there is minimal tax benefit from ever using tests with excessive reserved powers. They are only useful where the Settlor’s objectives are succession planning rather than tax planning.
You are most unlikely to see UK-connected parties using reserved powers trusts.
As for Jersey “hiding French money in trusts”, I would find it astonishing if that is the case. I don’t know of any trustees with French clients, and I know that the big French banking groups on the island won’t touch French clients (ditto the German banks). The French banks always targeted the Middle Eastern market and a lot of that business moved to Jersey when Beirut’s civil war flared up in the early 1980s. The big French banks like BNP/Paribas were very strong out there at the time re Middle Eastern clients and they needed to move their business elsewhere as Beirut was known as a major private banking centre.
I hear all of that and say 1) nothing you say stops tax abuse 2) nothing Jersey has power to do can stop that tax abuse 3) I do not trust Jersey professionals to stop that abuse because they have no power to do so
So, sham it is
Richard
That’s your opinion.
Whether a reserved powers trust is a “sham” is likely to be looked at on a case by case basis. Under all legal principles, I suspect 9 out of 10 such trusts would be deemed not to be a “sham”.
In Jersey no doubt
Elsewhere different criteria apply
And that’s my point
Which you are missing. Deliberately?
I don’t understand your point. I’m saying that 9 out of 10 Jersey reserved powers trust would not be deemed a sham. I’m not talking about how Jersey views it. I’m talking about how it will be viewed in the countries where there is a nexus with the trust parties. Just because it might get looked through for tax purposes does not make it a sham. Legally it is still a valid trust.
But a) does the other country know b) how do you know it will not be a sham and c) what for?
The use of reserved powr trusts in jersey is generally for persons from the middle east who do not pay income or capital gains tax, but a voluntary religious contribution; the Zakat. You knwo Richard, like the collection on a Sunday morning service. Perhaps yoru were unaware that not all the world pays income tax, or shall we ask for a declaration as to how much you put in the plate each Sunday? Is it one tenth, if so, of what?
And let me be candid – I do not believe you
Richard
(A) The “other country” doesn’t need to know. It does not levy any personal taxes. It has no desire and no need for the information.
(B) Because I’m an expert in trust law, as a solicitor who has specialised in trusts for 40 years. I know what a sham trust is and is not.
(C) it is legal for inheritance and succession planning, passing wealth to the next generation, keeping the family company intact and preserving jobs of non-family employers of the family business.
And we don’t believe you because there is no way of knowing – and that is deliberate
Which is why we’re right to say they are a sham – as even the local legal journal does
Stop defending the indefensible
Richard, your claim that the settlor and trustee under a discretionary trust cannot be the same person is wrong under English law, as a few minutes’ research would tell you. Such a trust is not a sham, and the beneficiaries can enforce in an English court if the settlor/trustee acts in breach of the terms of the trust.
Attempts to use a trust of this kind for UK tax avoidance would likely fail, as the trust would itself have potential income tax, capital gains tax and inheritance tax liabilities, plus anti-avoidance provisions (e.g. the gifts with reservation of benefit rules).
So for tax it’s a sham
That was my point
Because what I am saying is people pretend there are trusts in Jersey which are no such thing – as Jersey knows and acknowledged in the mail correspondence I linked to
So your point changes nothing
Of course its not a sham for tax purposes. Its simply that specific anti-avoidance legislation makesit ineffective for UK tax purposes, which is precisely the purpose of anti-avoidance legislation!
Such trusts were designed for estate planning, not tax planning. They were designed for persons from parts of the world where tax planning is not the primary objective. They do not work for UK tax planning but that was never what they were aimed at!
But nothing stops them being used for it – and this not being known to those who think there is a trust when there is not
So it is a sham
But are they in fact being used for tax planning rather than estate planning?
I have a gun licence and I use the gun to shoot rabbits. I don’t use it to commit crimes with it. I could, but I don’t.
Who knows?
They’re secret
And there must be a reason for that
It’s reasonable to think it is nefarious
Its not anyone else’s business, least of all prying eyes like yours, if all parties are complying with all reporting obligations to which they are subject which, in the case of clients from the regions of the world for whom reserved powers trusts were intended, has nothing to do with tax planning or even tax avoidance, let alone tax evasion.
The right to privacy over one’s financial affairs is neither illegal nor immoral.
There is no effective regulation of trusts in Jersey
It is all devolved
There isn’t even a register
How can it work in that case
And yes, the Uk is as bad
Of course there is a right to privacy in your own name – but trusts are created under statute and so the right of privacy should be foregone
No effective regulation of trusts on Jersey? Utter nonsense. All fiduciary services providers are very heavily regulated by the JFSC, to the extent that they are being regulated out of existence. Undoubtedly the toughest offshore trust regulation in the world.
Your last para is merely your opinion, which is not law. There is no requirement in any law anywhere in the world requiring a settlor to accept loss of privacy in order to be entitled to form a trust.
Wishful thinking does NOT equal law.
Wait – we’re winning the battle on this one
My wishful thinking has a way of becoming law these days
But you haven’t won it yet. A trusts register and a company beneficial ownership register just isn’t going to happen. Why? Because the US will not break its constitutional obligation by creating such registers there. Hell, they won’t even enter into a reciprocal FATCA for that very reason.
The US will become the world’s ultimate tax haven. It is already happening and gathering pace right now.
That will not stop you having a trust register
I agree the US is a problem
Sorry, Trust are not “created” under statute in the English jurisdction,certain can be, butthe princple is tyhat teuy are a propety law arrangement, not a form of partnership or company. They have no legal personality. Even the French have had to recognise that.That is why it is the trustees which are regulated, at least in Jersey. Trustees are simply not regulated within the United Kingdom. It is simply not possible for a register to be set up, within the context of an English or “anglo-american” law trust. certain carribean jurisdictions have been arm-locked into it, and may we wish them well in their neo-feodalised state. Note that Jersey was able to accommodate trusts, saving over Jersey immovables, within its laws prior to the 1984 act, which was basically passed to align a definition of a trust, both domestic and foreign, within the Hague Convention’s guidelines for recognition. There is a Hague Confer”ence on Internationa Law convention of 1984 which renders your arguments as to sham entirely unfounded and incoherent, as the French signed it. Perhaops a little reading might assist, it is in both French and in English. Copies of the full work of the Conference is still available via http://www.hcch.net. Perhaps the fact that the UK ratified it and was the main instigator of the Convention, means this is a “Sham” too, or did the lack of consultation with TJN mean that it can’t be right?
Respectfully, I have referenced why reputable and learned lawyers agree with me – as well they should
Trusts with reservation of powers can be and often are shams
They are nominee arrangements. Now that is a trust – but when used for tax it’s a sham
So stop wasting my time with arguments that do not address the issue I raise
Richard
You say that “trusts with reserved powers can be and often are shams”. I accept that they “can be”, but on what basis do you state that they “often are”? How many have you seen to enable you to make that statement?
No they are NOT “nominee arrangements” just because they may be ineffective or tax purposes. They are simply that -ineffective for tax purposes. In order to be a “sham” there must be an intent to deceive, pretending that something is in fact something else. But nobody is pretending if they already know that the trust will not be effective for tax purposes as that was never the objective. The assets of the trust remain fully subject to the provisions of the trust, regardless of the tax effectiveness. That is unequivocally NOT a “sham trust”.
Read the correspondence between Jersey civil servants and politicians on this issue in 2006
This law was passed with an intent to deceive
Please don’t excuse the inexcusable
Of course I have read it, but you are assuming that trust practitioners are actually using it in a certain manner. The reality is very different.
Prove it
They didn’t believe you
How can I prove a negative? It is you who is making the allegations. The burden of proof rests with you.
I can accept that you are an expert in tax (even though I disagree with your beliefs). I can accept that you are an expert in accountancy, although again I don’t agree with all of your views. However, it is abundantly clear that your knowledge of trusts, and especially international trusts, falls a long way short of your knowledge of tax or accountancy. In many ways that is not surprising. You have worked in accountancy and in tax. You have not worked as an international trustee, and very frankly it shows.
You are right, I have not worked as an international trustee
I have also never sold my soul to the devil
Richard
I note that you seem to accept that the onus of proof is on you.
Your lack of knowledge of international trusts does explain why you have reached some of the conclusions that you have in relation to the uses of trusts.
Here’s a question for you to ponder.
A Middle Eastern-resident Muslim owns a family business. He has 3 sons and a daughter. Sharia inheritance law means that on his death his sons are heavily favoured, and his daughter is severely disadvantaged, so he chooses to use a Jersey trust with reserved powers (re the sale of the family business) to pass wealth on his death to his daughter so that she benefits equally with the the three sons. No tax issues involved, and in fact the objective is based on religion, rather than on residence, nationality or situs of assets. To what extent is this use of Jersey trust law an abuse?
A slight variance. The same Middle Eastern-resident man owns a property in London. Under UK inheritance law it will pass to his wife and children upon his death. He doesn’t want UK inheritance law overriding Sharia law. He wants the property to pass to his sons as if it were a (Saudi) asset. So he sets up a Jersey reserved powers trust to own the property, with the provisions of the trust being drafted to satisfy Sharia law. The reserved power is in relation to any trustee decision to sell the property. Again, no tax issues, and he is merely trying to follow his religion. What is abusive about that?
The proof of abuse has been delivered
The world believes it
Stop denying it
As for your questions – both reveal open contempt for the application of UK and/or Sharia law
All you prove is that you undermine the rule of law
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
That’s it, isn’t it?
Richard
You cannot have it both ways!
In the first example, it is fair enough to say that a Jersey trust is being used to avoid rule of law in the client”s home country, but this is a question of religion, rather than jurisdiction.
But in the second case, the client is using a trust precisely so that Sharia law CAN be followed.
Seems to me that you are totally against wealthy people investing their wealth in other areas of the world. Why would they do so if by doing so it forced them to compromise their religion by having to accept the succession laws of the investee country? Are yiu suggesting that Muslims should only be encouraged to invest in Islamic countries and that non-Muslims shouldn’t be allowed to invest in Islamic countries? Without these planning tools in place, and bear in mind that there are no personal taxes in the Middle East, foreign investment by Arabs just wouldn’t happen. Is that your desire?
I am against law being abused
Both did
Richard
You have in no way delivered any proof that reserved power trusts are actually being used for abusive purposes by a single regulated Jersey trustee. All you have is some copy emails dating back to around 2006 about what they MIGHT be used for.
If that’s “proof” then its not exactly solid, to say the least.
How many do you know have been set up? Do you know of ANY which have set up? Which trustees? That information is not on public record of course. Your reply will inevitably be “how can we know?”, but you are making allegations and calling it “proof” without a shred of evidence that any abuse whatsoever is going on in relation to reserved powers trusts.
Please tell us – if you know
I don’t know, but I’m admitting that I don’t know. As a result, I can’t assert that they are or they aren’t bring used in an abusive manner.
You very clearly don’t know either, but seemingly that’s sufficient for you to allege that they are being abused, without a shed of evidence.
No, you’re just wasting my time by ignoring the evidence
We are grateful for Trustee services because its kept us in the black during recession unlike the UK who taxes people so much they simply leave and has massive deficit. They would be doing what we are doing if they could.
That’s so trite it is ridiculous
But worth pasting because it is so trite
Mr Murphy
May I assume that you are familiar with Rahman vs Chase Bank? – a case which shook the Trust world to its core.
Jersey was the first jurisdiction to confront sham trusts.
There is not enough coverage of the positive effects that Jersey brings to the Trust business.
Oh yes, I am familiar
And I quoted a learned journal in support of my case
And correspondence by Jersey officials that also supports it
Now tell me what I got wrong when the evidence is all on my side
where did i say you got anything wrong?
If you don’t understand tone yet then you do have a lot to learn
So Mr Rahman was avoiding income tax? No, he was not subject to income tax or capital gains in his state of domicile, if he wanted to he coudl have paid eth zakat. Careful what you cite, read it first.
So, the trust according to you was invalidated, as it must have ben hiding something for tax purposes. There was no tax payable. The settlor was not subjecvtt o taxation in hsi state fo orgin residence and to the extent tha that English concept would ever be rleveant to a Saudi, and honour to the prophet, his domicile, The trust was treated as inexistent because of the behaviour of the settlor, who went beyond the powers reserved to him. The Shal argumeht went to the Settlor’s abuse of his reerved powers, not the existence of the powers themselves. Sound familiar? If he had remained within them, the trust would have been validated, as it would have been in England in comparable circumstances. You need to be very careful about attacking trusts, as you will end up subverting your own property law. Incidentally, have you and you supporters severed your LPA 1925 joint tenancies on your homes yet to avoid being caught with a statutory trust? Bit like a bra burning ceremony. Incidentaly, if you hadn’t noticed the English Land Register is already by definition a register of trusts over land, so start there in your own back yard.
PS take you blinkers off for a second.
Might I suggest you have a lot to learn?
you may
Your over-arching argument seems to be that Jersey is the main culprit, and architect, regarding reserved powers, however, Cayman were the first jurisdiction to pass reserved powers legislation and all other offshore jurisdictions have based their legislation on the Cayman model.
What was jersey supposed to do – disadvantage itself by repealing reserved powers?
That’s akin to saying that because my neighbour has a stolen car why should I disadvantage myself by paying for one?
I’d have thought a student might have learned a little logic, especially when it comes to argument